SEC mulls lower stock broker commission rate

The Securities and Exchange Commission (SEC) plans to remove minimum stockbroker commissions that have been in place for the last half century as it struggles to entice small investors amid a multiyear slowdown in market volumes.

This will help lower costs for stock market investors especially as the Philippine Stock Exchange (PSE) and SEC encourage millions of new retail investors to buy and sell equities on mobile wallet platforms such as GCash and Maya.

Meanwhile, brokers interviewed by the Inquirer were divided on the issue, with some supporting the move while others dismissed its effectiveness, citing bigger structural issues that need to be addressed.

The SEC this week issued a draft memorandum for the removal of the minimum commission of P20 per transaction, which was defined under a Presidential Decree issued by the late President Ferdinand Marcos Sr. in 1973.

At present, brokers charge a commission of 0.25 percent per transaction with the minimum amount set at P20.

Going zero possible

The removal of the minimum amount means commissions can be as low as zero, according to the memorandum. The SEC is seeking comments from the public until Jan. 26 this year.

“I think this is very timely given the rollout of stock trading on platforms like GCash and Maya where the target really is the micro-investor or people who want to invest P1,000 at a time,” William Cabangon, president of stock brokerage house AAA Securities, told the Inquirer in an interview.

PSE president Ramon Monzon had previously stated that trading on mobile wallets could attract up to 9 million new investors in a few years from under 2 million at present.

“This is a big step in liberating retail trading on smaller amounts,” Cabangon said, while adding that they were waiting for further steps, such as a new law aimed at lowering taxes on stock transactions.

Maybank Securities head of retail equities Mike Macainag is skeptical on the impact to raise market volumes but he said it’s still a positive development for raising investor awareness.

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“I just hope investors will buy quality stocks instead of buying the hype,” he said on Friday.

Another broker, who requested anonymity, said lower commissions were not the answer to address falling volumes.

Market turnover dropped for a second straight year in 2023 to P1.2 trillion, data from First Metro Investment Corp. showed.

“The biggest cost to investors is not the commission. It’s the stock transaction tax,” the broker said.

Last September, the House ways and means committee chaired by Albay Rep. Jose Salceda approved a bill to cut the stock transaction tax of 0.6 percent to 0.1 percent. Salceda said this would make the Philippines more competitive since the prevailing tax was the highest among major economies in Southeast Asia. INQ